Sunday, April 20, 2014

BS on New Corporate Law X Realty; et al


Posted: 26 Jul 2014 04:37 PM PDT
Prof. N. Balasubramanian has a new research paper titled Strengthening Corporate Governance in India: A Review of Legislative and Regulatory Initiatives in 2013-2014 that is available on SSRN. The abstract is as follows:...

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Bala N. Balasubramanian

Indian Institute of Management Ahmedabad; IIM Bangalore - Centre for Corporate Governance and Citizensip; Adjunct Professor

July 23, 2013

IIM Bangalore Research Paper No. 447

The passing of the long awaited Companies Act in 2013 is probably the single most important development in India’s history of corporate legislation, next only to the monumental Companies Act 1956 which it replaces. While significant improvements have been effected in required standards of corporate governance, there is also some concern of possible overreach making life more difficult for companies as well as their independent directors. Among the major provisions of the Act are those of restraining voting rights of interested shareholders on related party transactions, recognition of board accountability to stakeholders besides shareholders, and extension of several good governance requirements to relatively large unlisted corporations. The paper is organized in three sections. Section I briefly documents the evolution of corporate governance in the country; section II sets out how some of the key governance objectives are sought to be addressed by the Initiatives; and section III concludes highlighting some areas that still need further strengthening.

Number of Pages in PDF File: 56



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 ".....may force companies to consider other alternatives such as taking loans from banks instead of accepting deposits."

The new rules, as understood, has the one basic objective of safeguarding and protecting the interests of the investing public, mostly in the category suffering from ignorance or imbecility , having no capacity to know the nitty-gritty or not-so-obvious risk factors. Even if the "other alternatives" were to be resorted by the invested companies,that would have the same frightful consequences; the only difference being it is the banks and stakeholders to whom the same risk factors would be passed and be faced with.

As regards the mentioned requirements of filing returns or documents with the ROCs, without the machinery of a sophisticated kind in place to constantly scrutinize and keep monitoring as a continuous exercise,it seems to be a mere empty formality, so called paper-tiger, with no real purpose to serve.

Similarly , the requirement
"to obtain credit rating at regular intervals during the tenure of the deposit", is at best, of nuisance value, again with no real purpose to be served.

These , noted to have been simply glossed over in the write-up, nonetheless , in one's perspective, do call for a rethinking and drastic modifications of the new rules, seemingly framed with no insightful examination of the intricate implications.

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